Some Investors Hedge Wagers on the Yen

Japanese Currency Has Plunged 20% Since November; Now, Traders Are Girding for Reversal, Scooping Up Options Contracts

By

Matthew Walter

March 15, 2013 6:22 p.m. ET

Some investors are bracing for a sudden rally in the yen, following a 20% decline in the currency's value since November that left the yen at its lowest level against the dollar in more than three years.

Traders betting on a rebound in the yen are buying options contracts, known as calls, that would pay out should the currency regain some ground. Call contracts give the holder the right, though not the obligation, to buy an asset for a specific price during a certain period. In this case, the yen calls would allow traders...